6.Bank Loans and Related Allowance for Loan Losses

The composition of bank loans and delinquency analysis by loan segment is as follows:


									>90 days past			Total past due					Allowance		Total
			30-59 days			60-89 days			due and other			and other			Total		for loan		bank
December 31, 2015	Current		past due			past due			nonaccrual loans			nonaccrual loans			loans		losses		loans - net
Residential real estate mortgages	$	8,304		$	11		$	1		$	18		$	30	$	8,334	$	20	$	8,314
Home equity loans and lines of credit		2,720			4			1			10			15		2,735		11		2,724
Pledged asset lines		3,228			3			1			-			4		3,232		-		3,232
Other		64			-			-			-			-		64		-		64
Total bank loans	$	14,316		$	18		$	3		$	28		$	49	$	14,365	$	31	$	14,334

December 31, 2014
Residential real estate mortgages	$	8,092		$	9		$	2		$	24		$	35	$	8,127	$	29	$	8,098
Home equity loans and lines of credit		2,942			1			1			11			13		2,955		13		2,942
Pledged asset lines		2,320			-			-			-			-		2,320		-		2,320
Other		38			1			-			-			1		39		-		39
Total bank loans	$	13,392		$	11		$	3		$	35		$	49	$	13,441	$	42	$	13,399

First mortgages and HELOCs include unamortized premiums and discounts and direct origination costs of $80 million at December 31, 2015 and 2014, respectively. The Company had commitments to extend credit related to unused HELOCs, PALs, and other lines of credit, which totaled $7.4 billion and $6.7 billion at December 31, 2015 and 2014, respectively. The Company had commitments to purchase First Mortgage loans of $37 million and $24 million at December 31, 2015 and 2014, respectively. Additionally, the Company had a pipeline of First Mortgages in process of $223 million and $202 million at December 31, 2015 and 2014, respectively. All PALs were fully collateralized by securities with fair values in excess of borrowings at December 31, 2015 and 2014.

Schwab Bank provides a co-branded loan origination program for Schwab Bank clients (the Program) with Quicken Loans, Inc. (Quicken Loans®). Pursuant to the Program, Quicken Loans originates and services First Mortgages and HELOCs for Schwab Bank clients. Under the Program, Schwab Bank purchases certain First Mortgages and HELOCs that are originated by Quicken Loans. Schwab Bank purchased First Mortgages of $2.0 billion and $1.4 billion during 2015 and 2014, respectively. Schwab Bank purchased HELOCs with commitments of $573 million and $664 million during 2015 and 2014, respectively.

Credit Quality

Changes in the allowance for loan losses were as follows:


	December 31, 2015								December 31, 2014								December 31, 2013
	Residential			Home equity					Residential			Home equity					Residential			Home equity
	real estate			loans and					real estate			loans and					real estate			loans and
	mortgages			lines of credit			Total		mortgages			lines of credit			Total		mortgages			lines of credit			Total
Balance at beginning of year		$	29		$	13	$	42		$	34		$	14	$	48		$	36		$	20	$	56
Charge-offs			(1)			(2)		(3)			(3)			(2)		(5)			(5)			(6)		(11)
Recoveries			1			2		3			2			1		3			2			2		4
Provision for loan losses			(9)			(2)		(11)			(4)			-		(4)			1			(2)		(1)
Balance at end of year		$	20		$	11	$	31		$	29		$	13	$	42		$	34		$	14	$	48

The majority of the bank loans were collectively evaluated for impairment at both December 31, 2015 and 2014. There were no loans accruing interest that were contractually 90 days or more past due at December 31, 2015 or 2014. Nonperforming assets, which include nonaccrual loans and other real estate owned, totaled $36 million and $44 million at December 31, 2015 and 2014, respectively. Impaired assets, which include non-accrual loans, other real estate owned and TDRs, totaled $50 million and $61 million at December 31, 2015 and 2014, respectively. Troubled debt restructurings were not material at December 31, 2015 or 2014, respectively.

In addition to monitoring delinquency, the Company monitors the credit quality of First Mortgages and HELOCs by stratifying the portfolios by the year of origination, borrower FICO scores at origination, updated borrower FICO scores, LTV ratios at origination, and estimated current LTV ratios. Borrowers’ FICO scores are provided by an independent third party credit reporting service and were last updated in December 2015. The Origination LTV and Estimated Current LTV ratios for a HELOC include any first lien mortgage outstanding on the same property at the time of the HELOC’s origination. The Estimated Current LTV for each loan is estimated by reference to a home price appreciation index.

As of December 31, 2015 and 2014, 48% of the Company’s HELOC and First Mortgage portfolio was concentrated in California. These loans have performed in a manner consistent with the portfolio as a whole.


			Weighted				Percent of Loans
			Average		Utilization		that are on
December 31, 2015	Balance		Updated FICO		Rate (1)		Nonaccrual Status
Residential real estate mortgages:
Estimated Current LTV
<70%	$	7,508		774	N/A		0.03	%
>70% – <90%		759		764	N/A		0.31	%
>90% – <100%		37		736	N/A		5.54	%
>100%		30		713	N/A		7.72	%
Total	$	8,334		773	N/A		0.11	%
Home equity loans and lines of credit:
Estimated Current LTV
<70%	$	2,277		772	37	%	0.09	%
>70% – <90%		373		760	50	%	0.48	%
>90% – <100%		48		748	63	%	1.02	%
>100%		37		739	67	%	1.79	%
Total	$	2,735		770	39	%	0.18	%
Pledged asset lines:
Weighted Average LTV
=70%	$	3,232		764	49	%	-

(1)	The Utilization Rate is calculated using the outstanding balance divided by the associated total line of credit.

N/A Not applicable.


	Residential		Home equity
	real estate		loans and
December 31, 2015	mortgages		lines of credit
Year of origination
Pre-2011	$	882	$	1,934
2011		424		114
2012		1,644		125
2013		2,450		232
2014		1,021		188
2015		1,913		142
Total	$	8,334	$	2,735
Origination FICO
<620	$	10	$	-
620 – 679		88		16
680 – 739		1,381		498
>740		6,855		2,221
Total	$	8,334	$	2,735
Origination LTV
<70%	$	5,913	$	1,858
>70% – <90%		2,408		860
>90% – <100%		13		17
Total	$	8,334	$	2,735


			Weighted				Percent of Loans
			Average		Utilization		that are on
December 31, 2014	Balance		Updated FICO		Rate (1)		Nonaccrual Status
Residential real estate mortgages:
Estimated Current LTV
<70%	$	7,131		774	N/A		0.04	%
>70% – <90%		882		765	N/A		0.50	%
>90% – <100%		61		740	N/A		2.95	%
>100%		53		726	N/A		10.95	%
Total	$	8,127		773	N/A		0.18	%
Home equity loans and lines of credit:
Estimated Current LTV
<70%	$	2,282		773	36	%	0.08	%
>70% – <90%		526		762	48	%	0.34	%
>90% – <100%		81		749	61	%	1.67	%
>100%		66		742	63	%	1.54	%
Total	$	2,955		769	39	%	0.20	%
Pledged asset lines:
Weighted Average LTV
=70%	$	2,320		764	50	%	-

(1)	The Utilization Rate is calculated using the outstanding balance divided by the associated total line of credit.

N/A Not applicable.


	Residential		Home equity
	real estate		loans and
December 31, 2014	mortgages		lines of credit
Year of origination
Pre-2011	$	1,119	$	2,244
2011		588		137
2012		2,107		147
2013		3,047		250
2014		1,266		177
Total	$	8,127	$	2,955
Origination FICO
<620	$	10	$	-
620 – 679		97		18
680 – 739		1,366		549
>740		6,654		2,388
Total	$	8,127	$	2,955
Origination LTV
<70%	$	5,572	$	1,979
>70% – <90%		2,538		955
>90% – <100%		17		21
Total	$	8,127	$	2,955